After a year of national political and economic uncertainty there is a new mood of optimism among clients in the property sector as we enter 2020. We’ve seen some definite reluctance from buyers and developers to move forward with their purchase plans during the last couple of years. This was very evident at times during 2019 when some adopted a ‘wait and see’ approach to the market.
Figures from the UK Finance trade association appeared to confirm this when they showed that lenders approved 41,219 mortgages for new residential property purchases in October, which was a seventh month low.
Meanwhile, research based on HM Land Registry data has found that the daily amount spent by commercial property buyers on real estate transactions in England and Wales had dropped by £20.6m between 2017 and 2019. The analysis, published by Search Acumen in December 2019, shows that the average daily spend was £270m from January to August 2017 – falling to £265m in 2018 and then £249m in 2019.
Although the picture is not quite as black and white as many – particularly the politicians – may have us believe, clearly sentiment is key. Greater certainty around Brexit following the Conservative general election victory might encourage more investors, developers and buyers to stop holding off as we enter 2020.
In conversations with our property finance clients spread across the commercial, residential, auction and development spaces we have noted a considerable uplift in positivity. The increased certainty means they can move forward with more confidence and optimism, albeit, perhaps, cautious optimism.
There is still a long road to travel on Brexit and there are sure to be more ‘bumps’ along the way but the situation could have been significantly worse. The election result and knock-on effect for Brexit is a shot in the arm for the industry. Feedback from our clients, particularly among investors in Buy-to-Let, has suggested that a Labour victory would only have accelerated the exit of many from this sector.
It would also be fair to say that number of our clients also expressed very serious concerns about Labour’s proposals to introduce a Right to Buy scheme to help tenants purchase rented homes at reasonable prices and set new rent controls.
Clearly, many in the property sector will have breathed a sigh of relief with the Conservative victory. Even so, we may find housing and property falling down the priorities of the new government’s ‘to do’ list as it focuses on Brexit in the short and medium term. Government interventions, which we have experienced in property – especially the private rented sector – over the past few years are still set to continue.
The Conservatives have pledged to introduce ‘lifetime’ fixed rate mortgages. Whilst popular in Europe, we don’t foresee them being adopted at such an extent in the UK market. Although the party’s manifesto is not too detailed on this point, the proposition is unlikely to be workable due to a number of life events such as changing jobs, moving home and so on. In the past we have found that 10-year fixed rates actually have had little up-take, indicating the paucity of appetite for such products.
The Tories have also committed to a lifetime deposit scheme for renters, which prevents tenants from having to pay the deposit for a new property before they have received a refund of the deposit for the previous property. This appears to be a welcome introduction as it assists renters to move at less expense.
We could see further moves on Stamp Duty in the new government’s Budget as well as long heralded proposals for the abolition of section 21 ‘no fault’ evictions in the rental market. There have also been suggestions of an interest rate cut by the Bank of England depending on Brexit developments.
It may be necessary for buyers, investors, landlords and developers to move quickly to secure the finance they need to capitalise on new opportunities or adapt to changing circumstances amid the changing political and economic landscape in the coming year.
We are on hand to help with all types of property finance, commercial buy-to-let mortgages, auction finance and property insurance with innovative and market leading solutions for all types of borrowing.
Gaining sound, independent advice from experienced experts will be more important than ever – whatever 2020 holds in store.
